New York State Health Foundation

Transcription

1 Financial Statements December 31, 2016 and 2015

2 Independent Auditors' Report To the Board of Directors of New York State Health Foundation We have audited the accompanying financial statements of New York State Health Foundation (the Foundation ) which comprise the statements of financial position as of December 31, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PKF O CONNOR DAVIES, LLP 665 Fifth Avenue, New York, NY I Tel: or I Fax: I PKF O Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

3 To the Board of Directors of New York State Health Foundation Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New York State Health Foundation as of December 31, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information on page 14 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. May 17, 2017

4 Statements of Financial Position December ASSETS Cash and cash equivalents $ 1,017,059 $ 919,988 Accrued investment income 6 35,637 Prepaid federal excise tax 164, ,000 Investments 275,309, ,113,851 Deposits and other assets 8, ,579 Property and equipment, net 108, ,418 $ 276,606,882 $ 272,743,473 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 323,007 $ 265,296 Grants payable, net 5,175,574 7,388,920 Deferred rent 627, ,296 Deferred federal excise tax 1,145, ,000 Total Liabilities 7,271,128 9,214,512 Net Assets Unrestricted 269,335, ,528,961 $ 276,606,882 $ 272,743,473 See notes to financial statements 3

5 Statements of Activities Year Ended December Temporarily Unrestricted Unrestricted Restricted Total REVENUE AND SUPPORT Investment Income Interest and dividends $ 2,734,453 $ 2,828,008 $ - $ 2,828,008 Net realized gain from sale of investments 5,495,377 5,321,868-5,321,868 Less investment expense 815, , ,886 Net Investment Income 7,414,130 7,397,990-7,397,990 Rental income 174,372 84,060-84,060 Contributions , ,000 Net assets released from restrictions - 330,000 (330,000) - Total Revenue and Support 7,588,502 7,812,050 (215,000) 7,597,050 EXPENSES Program Services Grants authorized, net of rescinded/refunded amounts 9,253,005 12,579,962-12,579,962 of $54,640 and $82,156, and present value discount of $5,623 and ($10,051) Program support, planning and development 3,519,376 3,692,949-3,692,949 Total Program Services 12,772,381 16,272,911-16,272,911 Operations and governance 757, , ,117 Total Expenses 13,530,288 17,058,028-17,058,028 Change in Net Assets Before Unrealized Gain (Loss) on Investments and Provision for Federal Excise Taxes (5,941,786) (9,245,978) (215,000) (9,460,978) Unrealized gain (loss) on investments 12,096,084 (10,383,025) - (10,383,025) Provision for federal excise taxes (347,505) (246,000) - (246,000) Change in Net Assets 5,806,793 (19,875,003) (215,000) (20,090,003) NET ASSETS Beginning of year 263,528, ,403, , ,618,964 End of year $ 269,335,754 $ 263,528,961 $ - $ 263,528,961 See notes to financial statements 4

6 Statements of Cash Flows Year Ended December CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 5,806,793 $ (20,090,003) Adjustments to reconcile change in net assets to net cash from operating activities Depreciation 28,506 54,014 Realized gain from sale of investments (5,495,377) (5,321,868) Unrealized (gain) loss on investments (12,096,084) 10,383,025 Deferred federal excise tax 241,505 (207,000) Discount on grants payable 5,623 (10,051) Deferred rent (29,254) 27,414 Changes in operating assets and liabilities Accrued investment income 35,631 (31,600) Other receivables - 410,391 Prepaid excise tax (44,000) 103,000 Deposits and other assets 418, ,534 Accounts payable and accrued expenses 57,711 34,683 Grants payable (2,218,969) 2,141,247 Net Cash From Operating Activities (13,289,721) (12,094,214) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (9,452) (36,688) Proceeds from sale of investments 13,396,244 10,073,347 Net Cash From Investing Activities 13,386,792 10,036,659 Net Change in Cash and Cash Equivalents 97,071 (2,057,555) CASH AND CASH EQUIVALENTS Beginning of year 919,988 2,977,543 End of year $ 1,017,059 $ 919,988 SUPPLEMENTAL CASH FLOW INFORMATION Federal excise taxes paid $ 150,000 $ 350,000 See notes to financial statements 5

7 Notes to Financial Statements December 31, Organization New York State Health Foundation, formerly The New York Charitable Asset Foundation, (the Foundation ) is a New York not-for-profit corporation organized on October 25, 2002 to pursue tax-exempt charitable purposes. The Foundation was formed as part of the conversion of Empire HealthChoice, Inc. (doing business as Empire Blue Cross & Blue Shield) ( Empire ) to a for-profit corporation. Pursuant to the legislation authorizing the conversion, the Foundation received five percent of the stock of WellChoice, the holding company for Empire. The Foundation provides funding and grants for the health care related needs of residents of the State of New York ( NYS ), including without limitation, (i) expansion of access to health care by extending health insurance coverage to NYS residents who cannot afford to purchase their own coverage or who have coverage that is inadequate to meet their needs, (ii) expansion and enhancement of access to health care by augmenting and creating health care programs that deliver services to populations that are unable to access health care or that improve public health, (iii) augmentation of its other program priorities by supporting programs that inform and educate NYS residents about public health issues and empower communities to address the issues by becoming more effective at identifying and articulating health care needs and implementing solutions, and (iv) conducting any and all lawful activities which may be useful in accomplishing the foregoing purposes. Assets, liabilities and net assets of the New York State Health Foundation Trust (the Trust ), a revocable trust, are included in the accompanying financial statements. The Foundation is the sole trustee and beneficiary of the Trust. 2. Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents consist of checking and money market accounts. The Foundation considers all highly liquid debt instruments available for current use with a maturity date of three months or less at the date of purchase to be cash equivalents. 6

8 Notes to Financial Statements December 31, Summary of Significant Accounting Policies (continued) Fair Value of Financial Instruments The Foundation follows U.S. GAAP guidance on Fair Value Measurements which defines fair value and establishes a fair value hierarchy organized into three levels based upon the input assumptions used in pricing assets. Level 1 inputs have the highest reliability and are related to assets with unadjusted quoted prices in active markets. Level 2 inputs relate to assets with other than quoted prices in active markets which may include quoted prices for similar assets or liabilities or other inputs which can be corroborated by observable market data. Level 3 inputs are unobservable inputs and are used to the extent that observable inputs do not exist. The Foundation follows U.S. GAAP guidance which removed the requirements to categorize within the fair value hierarchy alternative investments where fair value is measured using the Net Asset Value ( NAV ) per share as a practical expedient. Investment Valuation and Income Recognition Investments are stated at fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date. Realized gains and losses on the sale of investments are computed on the specific identification basis. Realized and unrealized gains and losses are included in the determination of the change in net assets. Property and Equipment Property and equipment are carried at cost. Leasehold improvements are depreciated over the lesser of the life of the asset or the term of the lease. Depreciation is recorded using the straight-line method over the estimated useful lives of other assets, which range from 3 to 5 years. Physical assets acquired with costs in excess of $1,000 and having a period of benefit in excess of one year are capitalized. Grants The liability for grants is recognized when specific grants are authorized by the Board of Directors and the recipients have been notified in an award letter. Presentation of Net Assets Net assets are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the Foundation s net assets and changes therein are classified as permanently restricted, temporarily restricted or unrestricted. Unrestricted net assets do not have donor-imposed restrictions. Temporarily restricted net assets are subject to donor restrictions that are expected to be satisfied by passage of time or actions of the Foundation. Permanently restricted net assets contain donor-imposed restrictions that stipulate that resources be maintained permanently, but permit the Foundation to use or expend part or all of the income derived from the donated amounts for a specified purpose. The Foundation does not have any permanently restricted net assets. 7

9 Notes to Financial Statements December 31, Summary of Significant Accounting Policies (continued) Contributions Contributions are recorded as temporarily restricted support if they are received with donor stipulations that limit the use of the contribution or that have time restrictions. When a temporary restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Reclassifications Reclassifications of certain prior year amounts have been made to conform to the current year presentation. Accounting for Uncertainty in Income Taxes The Foundation recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Management has determined that the Foundation had no uncertain tax positions that would require financial statement recognition or disclosure. The Foundation is no longer subject to examinations by the applicable taxing jurisdictions for periods prior to Subsequent Events Evaluation by Management Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued, which is May 17, Concentrations of Credit Risk The Foundation s financial instruments that are potentially exposed to concentration of credit risk consist of cash, cash equivalents and investments. The Foundation places its cash and cash equivalents with quality financial institutions. The Foundation invests in exchange traded funds and collective trust funds. At times, cash balances may be in excess of FDIC insurance limit. The Foundation routinely assesses the financial strength of its cash, cash equivalents and investment portfolio. As a consequence, concentrations of credit risk are limited. 8

10 Notes to Financial Statements December 31, Property and Equipment Property and equipment consists of the following as of December 31: Furniture and equipment $ 500,494 $ 496,990 Leasehold improvements 141, , , ,592 Less: accumulated depreciation 533, ,174 $ 108,364 $ 127,418 The Foundation disposed of $5,948 and $33,011 in fully depreciated property and equipment during the years ended December 31, 2016 and Investments The following are major categories of investments measured at fair value on a recurring basis at December 31, grouped by fair value hierarchy for those investments subject to categorization within such hierarchy: 2016 Investments Measured at Net Level 1 Asset Value (*) Total Exchange Traded Funds Equity fund $ 43,112,944 $ - $ 43,112,944 Fixed income fund 79,132,338-79,132,338 Natural resources fund 12,437,300-12,437,300 Alternative Investments Collective trust funds - 140,626, ,626,486 $ 134,682,582 $ 140,626,486 $ 275,309, Level 1 Investments Measured at Net Asset Value (*) Total Exchange Traded Funds Equity fund $ 40,995,558 $ - $ 40,995,558 Fixed income fund 82,044,396-82,044,396 Natural resources fund 12,148,125-12,148,125 Alternative Investments Collective trust funds - 135,925, ,925,772 $ 135,188,079 $ 135,925,772 $ 271,113,851 (*) As discussed in Note 2, investments that are measured using the practical expedient are not classified within the fair value hierarchy. 9

11 Notes to Financial Statements December 31, Investments (continued) Information regarding investments valued using NAV as practical expedient at December 31, 2016 is as follows: Fair Value Unfunded Commitments Redemption Frequency (If Currently Eligible) Redemption Notice Period Equity funds (see "a" below) $ 140,626,486 $ - Daily 3 Days a. These assets are in vehicles organized as collective trust funds and the value of the Foundation s interest in these investments is reported by their respective fund managers. The funds include index funds for domestic equities using the Russell 1000 Index and global equities using the Morgan Stanley All Country World Index (excluding US). Investments organized as collective trust funds are considered alternative investments for financial reporting purposes. The Foundation believes that there is little risk regarding the valuation of these assets: all of the investments comprise publicly traded securities where market values are readily available and almost all have few restrictions on redemption by the Foundation. All of the investments may be redeemed daily. As of December 31, 2016, four individual investments represented approximately 34%, 29%, 17% and 16% of total investments. As of December 31, 2015, four individual investments represented approximately 34%, 30%, 16% and 15% of total investments. All four of these investments were in broadly diversified index funds. 6. Program Related Investment (PRIs) The Foundation makes loans to charitable organizations to assist in program related activities. PRIs, defined in IRC 4944(c), have a primary purpose of advancing the mission of the Foundation without a significant purpose of the production of income or the appreciation of property. PRIs are treated as charitable distributions on Internal Revenue Service Form 990-PF, the tax and information return filed by private foundations for minimum-distribution requirement purposes. 7. Federal Excise Tax The Foundation is exempt from federal income taxes under Section 501(c)(3) and 509(a) of the Internal Revenue Code and has been further classified as a private foundation. The Foundation is subject to an excise tax on its net investment income. Excise taxes consist of two components: current taxes based upon net investment income and deferred taxes which arise from the difference between the tax cost of the investments and the fair value. 10

12 Notes to Financial Statements December 31, Federal Excise Tax (continued) For the years ended December 31, federal excise tax expense (benefit) consisted of the following: Grants Payable Current $ 106,000 $ 453,000 Deferred 241,505 (207,000) $ 347,505 $ 246,000 The Foundation has entered into grant commitments with certain organizations. Payments to these organizations at December 31, are to be made as follows: Less than one year $ 3,258,066 $ 5,216,296 One to three years 1,991,459 2,252,198 5,249,525 7,468,494 Less: present value discount 73,951 79,574 Grants payable, net $ 5,175,574 $ 7,388,920 To reflect the time value of money, grants payable as of December 31, 2016 and 2015 were discounted to the present value using the Federal Reserve business lending rate of 3.50% and 2.92%, respectively. 9. Temporarily Restricted Net Assets In 2014, the Foundation received two grants from private foundations. One of the grants totaling $115,000 was used to support the Foundation s statewide initiative to provide insurance enrollment assistance to underserved communities. The second grant totaling $100,000 was used to evaluate the South Bronx Healthy and Livable Neighborhoods program. In 2015, the Foundation received a grant totaling $115,000 from a public charity to support its enrollment initiative. During 2015, all three grants were redistributed to three charitable organizations. There were no temporarily restricted net assets as of December 31, 2016 and Retirement Plans The Foundation maintains a 403(b) defined contribution plan, which covers all employees that meet eligibility requirements. The Foundation matched employee contributions up to 7.5% of their annual salary in 2016 and The Foundation made an additional 5% discretionary employer contribution to the 403(b) plan in 2016 and The Foundation made contributions totaling $285,877 and $313,492 to the plan for 2016 and 2015, respectively. The Foundation also maintains a 457(b) plan that is limited to senior level management employees. The Foundation does not make contributions to the 457(b) plan. 11

13 Notes to Financial Statements December 31, Commitments Lease Commitments The Foundation has a lease for its office space in New York City expiring in The lease contains escalation clauses that provide for increase in payments resulting from increases in real estate taxes and certain other building expenses in excess of the base period amounts. The Foundation s policy is to record base rent on a straight-line basis over the term of the lease. The future minimum rental payments under the lease agreement are: 2017 $ 612, , , , ,500 Thereafter 2,762,500 $ 5,865,000 Rent expense totaled $571,413 for both 2016 and Rental Income The Foundation leases part of this space to a third party. This agreement is renewable on a quarterly basis. In addition, during 2016 the Foundation entered into an additional sublease for its office space commencing February 1, 2017 and expiring on January 31, The future minimum rental payments to be received under these lease agreements are: 2017 $ 108, ,828 $ 116,742 * * * * * 12

14 Supplementary Information For the Year Ended December 31, 2016 (With Summarized Totals for the Year Ended December 31, 2015)

15 Functional Allocation of Expenses Year Ended December 31, 2016 (with summarized totals for the year ended December 31, 2015) Operations Program and Services Governance Investment Total Total Grants authorized, net $ 9,253,005 $ - $ - $ 9,253,005 $ 12,579,962 Allocated Expenses Salaries and wages 1,902, , ,616 2,628,269 2,722,952 Payroll taxes and employee benefits 524, ,725 93, , ,490 Legal fees - 51,773-51,773 4,811 Accounting fees - 33,973-33,973 33,637 Other professional fees 43,234-50,000 93, ,995 Depreciation 20,524 4,276 3,706 28,506 54,014 Occupancy 522, ,822 94, , ,607 Travel and meetings 105,313 14,763 3, , ,068 Printing and design 15,256 7,006-22,262 18,684 Office expenses and IT 92,329 28,040 11, , ,812 Insurance 41,989 8,600-50,589 52,928 Outreach and public events 251,714-1, , ,144 Miscellaneous - 6,666-6,666 8,703 Total Allocated Expenses 3,519, , ,359 4,873,642 4,996,845 Direct Investment Expenses Manager fees , , ,107 Total $ 12,772,381 $ 757,907 $ 815,700 $ 14,345,988 $ 17,809,914 See independent auditors' report 13